MANY chemicals have been severely affected by the winter storms Uri and Viola that rocked the Gulf Coast region this week, including Propylene Oxide, Propylene Glycol, Hydrocarbons, Acetone, Isopropyl Alcohol, P-series Glycol Ethers, E-series Glycol Ethers, Chlorine, Caustic Soda, and Hydrochloric Acid, to name a few. The weather crisis has caused dozens of plant outages, a flurry of Force Majeure notifications, and in some cases a shortness of supply. Products are delayed as large percentages of US capacity are offline- Ethylene 65%, Propylene Oxide 49%, Ethylene Glycol 89%, and etc.
This historic winter storm in the Gulf Coast hasfurtherexacerbated an already tight situation on Propylene Oxideand derivatives- see: Rising Propylene Shifts Market for IPA, Other Chemicals. The further impact of the storms is likely to be massive on a market already at 10-year-highs, and could take many weeks to resolve.
For questions on how this will affect your chemical supply and/or price, reach out to a sales representative.
Sodium Hydroxide Market Heats Up
May 12, 2020
As summer nears, the Sodium Hydroxide (Caustic) market is heating up.
For three consecutive months, producers have tabled increases, and they appear to be sticking.
Here’s how the COVID-19 virus led to a domino effect for Sodium Hydroxide prices… and how the dominoes fell.
Amid the outbreak of the deadly COVID-19 virus, governments worldwide order lockdowns, business closures, and other drastic measures to slow the spread of the disease. Quickly, the world finds itself in an economic downturn.
Construction projects (i.e. new home construction) and the automotive industry are particularly vulnerable in a downturn, and are significantly affected. The automotive industry virtually shut down worldwide. New home construction saw it’s largest monthly decline in decades.
Construction and automotive industries are both major consumers of PVC plastics. Suddenly, demand for PVC is down 30-40%.
PVC is one of the largest consumers of Chlorine, and essentially drives Chlorine production. Although Chlorine is also used to make Bleach, and demand for disinfectants is high, the significant reduction in demand for PVC has overshadowed the increased demand for Bleach. (Bleach is only one small outlet for Chlorine.)
With 30% less Chlorine demand worldwide, Chlor-Alkali plants cut operating rates to 70%. With Sodium Hydroxide being a beneficial co-product of Chlorine production, it is now in shorter supply.
Demand for Sodium Hydroxide is more stable than Chlorine, and has not taken such a hit. Certain markets for Sodium Hydroxide, especially pulp & paper, are in great demand (think toilet paper, packaging for online sales).
With supply dropping more than demand drops, Sodium Hydroxide tightens. Increases from producers, rolled out for three consecutive months, are noticeable. Sodium Hydroxide is widely on allocation.
With questions about your Sodium Hydroxide supply/price, feel free to reach out to your Sales Representative. The team at CORECHEM is here to support our customers during this unprecedented time, and look forward to hearing from you!
U.S. Sodium Hydroxide Flows Into South America
June 4, 2019
U.S. exports of Sodium Hydroxide to Brazil have just increased exponentially. The crumbling Pinheiro neighborhood, and the world’s largest alumina refinery, are the reason why.
Petrochemical producer Braskem in Brazil has recently shut down salt mining operations following a governmental report citing the salt mines, combined with heavy rainfall, to be the cause of geological instability in the Pinheiro neighborhood.
Because salt is necessary for the production of Sodium Hydroxide, Braskem has subsequently declared force majeure and has begun importing product from the U.S. to fulfill contracts.
Another company in Brazil, aluminum producer Norsk Hydro, has begun importing a significant amount of additional Sodium Hydroxide from the U.S. A government-issued production embargo issued due to environmental concerns has recently been lifted. The Alunorte alumina refinery is allowed to run at full capacity after over a year of only being allowed to run at half capacity. Alumina production is one of the biggest consumers of Sodium Hydroxide in the world.
These additional significant exports to South America, combined with additional exports to Latin America, the Middle East and Asia (due to new alumina operations) are squeezing U.S. Sodium Hydroxide inventories. Domestic demand for Sodium Hydroxide is increasing as well. Meanwhile, several major U.S. producers have planned outages in the near future.
As a result of the shifts in the market, U.S. producers have announced increases. According to market prognosticators, there is a possibility that a portion of the increases could materialize in the third quarter. With questions about how this could affect you, reach out to your sales representative.
CORECHEM continues to monitor the effect of the tariffs on commodity chemicals, and we have already taken steps necessary to minimize the impact on our customers.
Get in touch with your sales representative for questions about how this could affect you.
Caustic Soda Update
December 18, 2018
Over the past few years, several factors have led to a global tightening of supply for Caustic Soda. In China, lackluster margins for co-product chlorine and new environmental regulations resulted in steady decline of availability, particularly for US imports. In Europe, the chlor-alkali sector committed in 2001 to phase out mercury-cell technology by 2020. This became legally binding when Mercury-cell production was declared outside of Best Available Techniques (BAT) in 2013, resulting in a mandate to close these facilities or convert to Membrane technology by December 2017.
For the latter part of 2018, supply has been stable to strong, with only a few scheduled plant turnarounds and short-term disruptions, such as terminal flooding in Wilmington, NC during Hurricane Florence in September. Operating rates, however, have dropped from the 90’s to the mid-80’s as seasonal demand for Chlorine decreases.
On the demand side, there have been several changes recently. With the aforementioned issues in China and Europe, the USA has become a more viable and competitive global source for large consumers such as Alumina producers in South America and Australia. This has led to a steady increase in U.S. exports, to the point that the U.S. has become reliant on the export market. According to a recent ICIS report, the U.S. exports approximately 28% of current output. Latin America accounts for over half of U.S. Caustic Soda exports.
This new export market was drastically interrupted in October, when Hydro’s alumina refinery AluNorte in Brazil announced a full curtailment of operations to meet the demands of environmental authorities. This lead to an almost immediate backup in the U.S., as Alunorte accounted for a large percentage of exports. Alunorte was able to restart operations at 50% capacity, but in the meantime many Caustic Soda shipments were forced to be diverted elsewhere. AluNorte is expected to be back at 100% capacity sometime in early 2019, which is expected to balance out the current reserves.
Shift from Diaphragm Grade to Membrane Grade:
An interesting twist to the market has been the steady shift in demand away from Diaphragm Grade and towards Membrane Grade product. This preference is due to the fact that Membrane contains less of the starting material, sodium chloride. The lower sodium chloride level reduces the rate of corrosion to costly equipment, particularly in paper mills, which accounts for one of the largest end-use markets. This shift has resulted in an increased availability of Diaphragm Grade, and a persistent tightness in availability of Caustic Soda Membrane Grade.
While pricing steadily increased up until the middle of 2018, the market appears to have leveled off and starting softening in the fourth quarter of 2018. In addition, there is a growing disparity in the pricing of Membrane Grade vs. Diaphragm Grade, due to the shift in demand towards Membrane.
In spite of the recent softening, all of the major U.S. producers recently announced a $40/DST increase for all grades, citing lower operating rates and the anticipation of increased demand as AluNorte and other major consumers come back online. This increase is intended to go into effect in January 2019.
Over the past few years, several factors have led to a global tightening of supply for Caustic Soda. In China, lackluster margins for co-product chlorine and new environmental regulations have resulted in steady decline of available Caustic Soda, particularly for the export market. In Europe, the chlor-alkali sector committed in 2001 to phase out mercury-cell technology by 2020. This became legally binding when Mercury-cell production was declared outside of Best Available Techniques (BAT) in 2013, resulting in a mandate to close these facilities or convert to Membrane technology by December 2017.
Shorter-term but nonetheless significant disruptions have come as well. In August 2017, the landfall of Hurricane Harvey in the U.S. Gulf Coast resulted in disruption of over 30% of U.S. chlor-alkali production. Further to this, a producer in Brazil experienced a fire on January 15, 2018, resulting in an immediate gap of 30,000 dmt of caustic soda, subsequently sourced from US producers.
There does not appear to be a near-term solution to the supply issues. With a relatively balanced demand for chlorine, there are currently no new chlor-alkali plants under construction in the USA.
With the issues in China and Europe, the USA has become a more viable and competitive global source for Caustic Soda for large consumers such as Alumina producers in Australia. This has led to a rapid increase in U.S. exports, as the spot export price for Caustic Soda has tripled in the last 24 months. In addition, east coast U.S. imports from Europe have significantly decreased, diverting U.S. Gulf Coast shipments to the U.S. east coast to fill the gaps. Along with this is the steadily growing economy and demand for Caustic Soda in other markets such as chemical manufacturing, pulp & paper, bleach, soaps & detergents, textiles, and water treatment.
Caustic Soda producers have steadily announced price increases to account for the increasing export demand and constrained supply. February 2018 announcements for Liquid Caustic Soda ranged from $60.00 to $85.00 per DST (Dry Short Ton). Dry caustic soda beads have followed suit, with a February announcement of $0.05 per pound.